Bitcoin reached over $60,000 on Wednesday, nearing its record high and continuing its unstoppable rise since the approval of a new kind of investment linked to the cryptocurrency.
At 1325 GMT, bitcoin traded at around $60,301, close to its record high of $68,991 — that was hit in November 2021 and which some analysts think is now achievable.
Since they were approved on January 10 by US securities regulators, exchange-traded funds (ETFs) linked to bitcoin have theoretically allowed a broader public to invest in the cryptocurrency without having to own it directly. The funds themselves, however, do own the digital currency.
The anticipated approval of the new investment product had boosted its price in recent months, which had mostly dropped by the end of 2022 following the collapse of several crypto giants.
The US launch of ETFs or ETPs (exchange-traded products) has “sparked a fresh wave of optimism, driving trading volumes and highlighting crypto-related firms”, says Mikkel Morch of specialist fund ARK36.
The instruments are similar to stocks or mutual funds in terms of accessibility to everyday investors.
Some investors keen to recover their bets had initially caused a wave of massive withdrawals from the GBTC (Grayscale Bitcoin Trust) fund, once it had been changed into an ETF.
But once the selling frenzy calmed down, flows into US bitcoin ETFs, such as that of asset management giant BlackRock, increased.
Exchange-listed cryptoasset-linked investment products have drawn around $5.7 billion since the start of the year, according to estimates by asset manager CoinShares published on Monday.
As more evidence of “the growing institutional support that’s driving this rally” in prices, Morch said, software company MicroStrategy announced on Monday that it had bought another 3,000 bitcoins (then worth $155 million).
The deal brought its total bitcoin holdings to 193,000 bitcoins (about $6.09 billion).
Bitcoin is created — or “mined” — as a reward when powerful computers solve complex problems to verify transactions made on the blockchain.
James Harte, an analyst from Tickmill, notes that prices are also supported as major industry players invest in bitcoin before the “halving” — or the splitting in half of reward for the token’s miners.
The event, which happens about every four years, is next due in April.
It is expected to reduce the rate at which new bitcoins enter the market, lowering the cryptocurrency’s potential availability for purchase, which should increase its value.
“As the creation of new bitcoin slows down, the existing scarcity of the digital asset becomes even more noticeable, typically leading to higher demand and, consequently, higher prices,” said Nigel Green, head of financial advisory firm deVere Group.
He added: “Cryptocurrencies remain highly speculative, but the huge interest in spot ETFs and the upcoming halving event… can be expected to keep up the current momentum which could lead bitcoin to exceed the $69,000 mark.”
The virtual unit has also been partly lifted by hopes that the US Federal Reserve will start to lower interest rates this year as inflation cools.
